Your credit score could literally kill your deal the next time you’re ready to buy a new home, vehicle, or other big ticket item! That’s right, a poor (or even a fair) credit score might hurt your chances of getting a loan, or if you’re fortunate enough to be approved for a loan, your interest rate, fees, and even your closing costs could be significantly higher. Your credit score also affects your credit card interest rates, insurance premiums, and even your employability. Why? Put simply, the lower your credit score, the greater the risk that you represent for the lender.
Over time, the additional personal finance charges really add up, especially with your credit cards, as we normally utilize credit cards as revolving accounts, carrying an account balance on them month after month, never quite paying them off before we charge something else to the card. And, with credit cards especially, the length of time that you carry a monthly balance can literally be years! (Don’t believe me? Look at your next credit card statement…new credit card regulations require this to be on your monthly statement.)
Obviously, the best way to assure that you’ll be able to get your next house, car, or even your next credit card, is to do everything you can to keep your credit score as high as possible. And, if your credit is already fair to poor, you’ll need to do everything you can to improve that score.
How can you improve your credit score?
- Repay what you owe promptly. Nothing will ruin your credit score faster than failing to repay a debt. Even a slow or missed payment can have a drastic affect on your score.
- Know your credit score, and how it is calculated. Factors such as your total debt load, how close your credit cards are to the credit limit, home ownership, and your employment history can all affect your score.
- If your total debt load is too high, or your credit cards are all running at their limit, work to pay more than the minimum due each month to bring down your balances, and reduce your debt load.
- Make sure that the information contained on your credit report is correct. If your credit report contains outdated or false information, dispute the reports, or have them corrected to at least contain accurate up to date information.
- Review your credit report regularly and seriously consider having a professional monitor your credit report. The cost of having a professional monitor your credit report and protect your identity is minimal compared to the cost of correcting and recovering from identity theft.
Even if you’ve already been rejected for a loan, implementing the tips discussed here can and will improve your credit score, and the next time you need credit, the results could be very different!